Government Concern About Wal Mart Case Study

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Market Power

The author of this report has been asked to select a firm and answer two of the provided questions as it relates to that firm. The questions that will be answered relate to price strategy and governmental concerns about market power. Indeed, Wal-Mart is in the thick of both of these phenomenon and it shows as one looks at political reactions and news stories in the media. Wal-Mart has grown from a small chain of stores to a global juggernaut and the amount of power that they wield given the size of their operations, how many people they employ and the market power they wield is hard to ignore or miss. It has gotten to the point that the government and other sources are attributing social problems to Wal-Mart and what they do. While it is perhaps a bridge too far to assert that Wal-Mart is creating social problems just from its own inertia and behavior, it is an intriguing question and the implications are hard to ignore.

Analysis

The governmental question that will be answered as part of this assignment asserts that governments are concerned with market power. Whether it be "too big to fail" or other such things, there can be a big problem when it comes to a major player in the market. Indeed, the big banks and General Motors were bailed out in the United States during the Great Recession. While Wal-Mart itself was not involved in that fray, there could theoretically be such a situation in the future given their sheer size. There is the argument that when the United States (as a country) sneezes, the world catches a cold. One could make the same argument about Wal-Mart. They are the largest employer in the United States and it is not even close. Indeed, Wal-Mart employs 2.2 million people worldwide and more than half of those (about 1.3 million) are in the United States. The second largest employer in the United States, that being Yum! Brands, only employs about half a million employees. They are the parent company of fast food restaurants Taco Bell, Pizza Hut and KFC. They also used to have ownership in Pepsi but that is no longer the case (Hess, 2016).

There is a litany of reasons that the United States government and advocacy groups in general are concerned about the girth and power of Wal-Mart but the author of this report shall seize on three that have huge implications when it comes to market power. The first two of the three are interlinked. They both stem from the fact that Wal-Mart is deemed to be paying wages that are too low. Even with its recent raise of all employees' wages to at least nine dollars an hour, which is nearly two dollars more than the federal minimum wage, many assert that Wal-Mart is putting and keeping people in poverty. There is the assertion that so many people that work at Wal-Mart are involved and/or enrolled in food stamps (SNAP), Medicaid and other income-driven programs that focus on healthcare, food or other services for the poor. Many in the government assert that Wal-Mart has the money and other resources to offer better benefits and wages but they are not doing so. Others say that the market itself should drive what those people are paid and why. The hard part of solving that dilemma is that Wal-Mart is such a huge part of the market in question and thus their actions by themselves help affect the market (Hess, 2016).

The third reason that Wal-Mart is of concern to the government is its sheer size in relation to the market at large. If Wal-Mart were to struggle and nearly fold like General Motors did during the recent Great Recession, the effects on the retail markets around the world would be seismic in scope and size. One manifestation and example of this is how Wal-Mart is perceived to be killing off the mom and pop shops that deal in the same goods, in whole or in part, as Wal-Mart. There is the common refrain that Main Street USA is suffering as a result of Wal-Mart's global dominance. Of course, Wal-Mart has the resources to buy in bulk and this leads to them paying less per unit than a mom and pop store could ever imagine. Another manifestation of how Wal-Mart seems to affect the market is that so many of their goods come from China and other non-American countries. Of course, Wal-Mart is far from being the only firm that does this but they do it on a scale that is really unmatched by anyone else. They actually have defined and completely operations in both the United States and China due to the sheer amount of business that they conduct with suppliers and manufacturers in that country.

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There are many that take on the "American First" ideal but many customers seize on price and the higher wages and benefits required as a bare minimum in the United States alone require that mass retailers use imported goods because buying American is much more expensive (Tabuchi, 2015).

To answer the other questions asked for the governmental market concerns, Wal-Mart absolutely has market power but there is vast disagreement on just how far the government could or should go when it comes to curtailing the vast and massive amount of market power that Wal-Mart has. The power they have is unmatched within the retail sphere. Wal-Mart clearly operates in a competitive market and their margins are not massive. However, they operate on a much larger and grander scale than competitors like Target, Kroger's and so forth and thus they are in an enviable position. They cannot ignore competitors and their pricing strategies as doing so would eventually lead to Wal-Mart's demise. At the same time, the current amount of breathing room that Wal-Mart has in terms of how much power and revenue they have as compared to competitors is rather vast right now. To offer a few examples, Wal-Mart and other competitors always try to outprice each other. They all offer Black Friday deals and promotions of one sort or another. They all try to present themselves as the superior alternative to other options in the marketplace, either in general terms or via calling out competitors by name. Pretty much all of the retailers seize on lower prices and better options for consumers. Given the amount of people in the United States that live paycheck to paycheck, this strategy is not surprising. One thing that Wal-Mart should be extremely mindful of is that online retailers like Amazon and Wayfair are really starting to come into their own and their presence is creating a massive market shift in terms of where people buy their goods. This includes goods that would previously be bought at Wal-Mart. Amazon and others have even got to the point where groceries and other items that cannot be shipped efficiently from a cost standpoint can be ordered through Amazon or similar vendors and Amazon has the goods delivered to the customer's home. Amazon has even started to introduce deliveries via drone, although it remains to be seen when that will actually be happening, how much it will cost and how well the firm will perform in doing such things. Obviously, the government, including agencies like the Federal Aviation Administration (FAA) are very interested and attentive to what Amazon is trying to do. Drones in general are creating a bit of a kerfuffle and in more than one way. It remains to be seen how that will develop over the long haul (Jansen, 2015).

The other main question from the list offered that will be addressed is the one about price strategy. There is the question as to whether Wal-Mart is different when it comes to advertising types and styles. Lastly, there is a question as to whether they use product differentiation. When it comes to advertising, Wal-Mart does not really do anything all that different from other retailers. Again, the scale and size of their promotions and sales are going to be larger than most other stores. However, the overall methods are pretty much the same as other retailers in the same sphere. As for product differentiation, Wal-Mart mostly sells the same brand name items as any other store. The one thing that tends to differ are the store brands that are sold. Indeed, many people are not willing to pay an extra buck or two for a name brand gallon of milk. Indeed, they will buy Great Value (Wal-Mart's store brand) or Market Pantry (Target's store brand) before they will buy goods from companies like Hiland, Anderson-Erikson or others. At the same time, there are those that will turn up their nose to a store-brand television and they would instead demand an established brand like Sony or LG. Rather than pick one or the other in terms of strategy, Wal-Mart does both (Neff, 2016). They try to compete with other stores….....

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